The worst mistakes rookie traders make
Trading in the equity markets is a roller coaster ride owing to their volatility and unpredictability. In contrast to investors who have long-term wealth creation goals, traders buy and sell securities more often and hold positions for much shorter periods to earn quick profits.
While early success may excite traders to trade more, initial failure may dampen the spirits of rookie traders. Hence, research and strategizing is very critical for a winning formula.
Below are few of the worst mistakes a beginner trader can make:
Not doing proper homework
Since the market is uncertain, playing a gamble and depending on luck can prove to be catastrophic. At times, the fortunes may be in your favor, but it will not always be the same. Hence, it becomes very essential for beginners to prepare and acquaint themselves with the intricacies of the market. There is no room for Jacks here; being a Master is the only option.
Lacking necessary resources
Understanding the market is of utmost importance and correct analysis of the market holds the key to a winning strategy. It underscores the need to have proper tools or software that can efficiently help us analyze the market and carry out trades.
Stock trading apps provide an excellent mobile app platform to users to examine the market and are easy to use. There are also softwares for traders who prefer using desktops over smartphones. Hence, having the necessary tools is a must before trading.
Not cutting losses early
No one likes booking losses, but being practical while trading is a smarter option than being overly-optimistic. To stop losses is as important as choosing the stocks to invest in. Assume that you are holding a commodity whose value is declining. Now, holding onto it in the hope of working out a profitable trade exposes one to a more significant loss. Hence, it becomes indispensable to stop loss at the right time.
Not sticking to a trading plan
To have a proper trading plan is one of the thumb rules. One should be very exact with the amount of money they can invest, the stocks they are targeting, the maximum loss they can afford, and so forth. Many times, when things do not go as expected, rookie traders tend to abandon their plan and take decisions in haste to cover up for losses. This can often worsen the situation. One should only trade if they have a solid trading plan in place.
Following the herd
Due to a lack of experience and confidence, beginner traders tend to follow the herd. For example, if the price of a stock is rising due to high demand, the beginners end up purchasing the stock at a higher price following the mass. Similar is the case when it comes to selling stocks. Hence, learning the tricks of the trade and developing the acumen is very important. Being self-sufficient is required rather than just being a follower.
If you are a rookie investor trying to beat the markets, do remember these above points at all times while trading.
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